Gold Bulls Remain Hopeful
Commentary for Friday, Jan 25, 2019 – Gold closed up $18.30 at $1297.40, close but no cigar. Gold opened flat and then decided, once again to be contrary – pushing towards the vaulted $1300.00 mark. This “flash” weekly finish is encouraging but considering the Washington mess and the fact that gold closed Tuesday at $1282.50 it may be another tempest in a teapot.
This sudden jump in price began as the dollar tanked – the Dollar Index moved from 96.4 through 95.9 most likely on a combination of political woes and economic news. The government shutdown continues but the clock ticking (maybe), the China-US trade talks drag on and there is another Federal Reserve meeting next week.
I also suspect the arrest of Trump’s friend Roger Stone brings joy to the Democrats and adds further froth to the rumors of problems in the Trump White House.
All of this continuing angst supports higher gold prices. But is this latest “inside info” just another version of a Keystone Cops short film. I used to love these when I was a kid, everyone running around in circles. I’m sorry to say that this funny nonsense eventually replaced the sober reckoning I used to have of politics when I was in college. At any rate I will leave it up to the reader as to whether or how serious anyone should take these latest political revelations.
In the meantime, keep your eye on the shorter term 60 day pricing chart. Today’s “pop” to the upside certainly helps the bullish position and more importantly reinvigorates an upward trend which was looking pretty worn out. But a look at the 5 year pricing chart requires some caution. I’m always suspicious when everyone is getting out the champagne and party hats.
The longer view of gold clearly shows a market struggling at the well-established $1350.00 overhead resistance. And like I have pointed out before gold must move and stay above $1350.00 before all these recent fireworks will be justified.
If gold cannot brush off the remaining cobwebs we remain stuck in a range which has been in place for 6 years – with plenty of political intrigue but no inflation to spark and enflame prices.
So keep your powder dry – if gold runs however this market will be transformed quickly because there are plenty of watchers and plenty of punters who will turn into buyers if the world financial structure begins to crack – even a little bit. Finally worth noting – Alex is cleaning out the safes – he has a flash sale on today and Monday if you are so inclined listen to the quote line.
This from Zaner (Chicago) – “While the charts remain vulnerable with another lower low probe for the week yesterday, the bull camp has to be cheered slightly because the gold market posted another rejection of the $1,275 level and prices are showing some strength to start today. Fortunately for the bull camp the Dollar has faltered from the very definitive upward thrust yesterday and therefore currency related pressure is missing to start today. Apparently gold continues to draft some safe haven support from the realization yesterday that US/Chinese trade talks were not as close to resolution as was hoped for last week. However, the market is comforted by news that China was found to be adding to its central bank reserves! The Chinese addition to reserves was reported to be the first “add” to reserves in two years, but we think the “add” is simply the first time the Chinese have allowed the inflow to be known. In the current environment the Chinese can shape the gold reserve investment as a sign they are re-allocating capital away from US Treasuries. Another development overnight that might add to the initial bull tilt is word from Asia of increased Wedding season buying in India. A slightly negative impact on gold was seen yesterday following an EU parliament vote to reject a proposal to would have allowed greater liquidity rules for banks trading gold in the euro zone. However we don’t think the gold market rallied off the hope of more European gold trading liquidity. Another tempering development facing the trade today is bearish comments from Mark Mobius who cautioned gold buyers that the Fed could still hike rates this year. In the end the bias is up but the bull case doesn’t dominate unless the Dollar falls back below 96.00. Total gold derivative holdings overnight fell minimally to 56.5 million ounces.
The palladium market broke down on the charts again overnight and that leaves the market in a negative technical condition into the last trading session of the week. Since we had difficulty justifying and at times explaining the massive run up in palladium prices over the last 2 months, we are a little hesitant to label the source of the current washout. However, we suspect that weakness in the Chinese economy is at least partially behind the slump from the January highs. In fact with hope for a US/Chinese trade deal dashed yesterday and prices sliding sharply yesterday, the Chinese situation is a weight hanging over the PGM trade. With the platinum market rallying in the face of a breakdown in palladium prices again overnight, we suspect some spread liquidation is taking place. While it would appear as if platinum found a solid value at this week’s lows, we have difficulty projecting platinum prices sharply higher in the current environment. Near term downside targeting in March palladium is seen at $1260.80 with support in April platinum moving up to $796.40.
With a strong upward thrust in the dollar this week, several probes down to $1,275 in February gold and weakness in a wide mix of physical commodity markets the bear camp retains a trend edge. While we give the bull camp a slight early edge to start the odds of a narrow trading range appear to be high. However the dollar has reversed from the spike up yesterday and a trade back below 96.00 in the Dollar could wake up a wave of gold buyers. On the other hand inability to hold above $1,275.30 could project a weekending washout in the February gold down to $1,269.10. In the silver market, a two day corrective bounce probably balanced the oversold condition into the low Tuesday and that could now set the stage for a failure down to $15.195.”
This insight from Gary Wagner (Kitco) is interesting and adds to the drama. Golden Cross Identified in Gold – “Market technicians use a multitude of moving averages in terms of’ the time cycles. These can vary from extremely short averages of three, seven or 10 minutes in length. Daily moving averages analyze long-term cycles and look at market momentum in terms of the big picture and long sustained moves.
In the case of looking for long sustained moves, the standards include a 50-day moving average, which indicates the intermediate or short-term trend of a stock or commodity. A 200-day moving average to indicate the long-term trend of a stock or commodity.
One of the more important technical patterns which market technicians are constantly looking for is when a cross occurs between two different length moving averages. When a longer-term moving average crosses below a shorter-term moving average it is called a “death cross”. This pattern is considered a bearish breakout which indicates that the market has been in a defined downtrend and has now broken with more momentum indicating a further decline in price.
When a shorter-term moving average crosses above a longer-term moving average it is labeled as a “golden cross”. This bullish breakout pattern can be created when any two different length moving averages have the shorter-term average crossing above the longer-term average. Most importantly this pattern indicates bullish market momentum.
Obviously, one of the most significant golden cross’s is when the 50 day, average, crosses above the 200-day moving average. Because markets do not trade straight up or straight down, technicians use a single moving average to determine the current trend. However, the cross (bullish or bearish) determines not only trend but more importantly indicates strong momentum is occurring in terms of the current trend visible in any given market.
Which takes us to our current scenario in gold. Over the last two days, we have identified a golden cross occurring on the daily charts in which the 50-day moving average is now crossed above the longest term 200-day moving average. This could indicate stronger momentum in terms of the bullish trend, which would result in higher pricing for gold.”
Silver closed up $0.40 at $15.64.
Platinum closed up $14.50 at $813.50 and palladium closed up $39.10 at $1358.80.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 8 believe gold will be higher next week – none thinks gold will be lower and 3 think it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 48 people thought the price of gold would increase next week – 29 believe the price of gold will decrease next week and 23 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Jan. 21 – Jan. 25
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